This article was jointly published by K1 Research & Klein Labs.

2025 Monthly Events Recap Calendar (Source: Klein Labs)

Looking back at 2025, it was not simply a bull or bear market, but a repositioning of the crypto industry within multiple political, financial, and technological contexts—laying the foundation for a more mature and institutionalized cycle in 2026.

At the beginning of the year, Trump's inauguration and executive orders on digital asset strategy significantly changed regulatory expectations. At the same time, the issuance of the $TRUMP token brought cryptocurrencies into the mainstream, market risk appetite rose rapidly, and Bitcoin broke through $100,000 for the first time in history, completing the first leap from "speculative asset" to "political and macro asset".

Subsequently, the market quickly responded to real-world constraints. The retreat of celebrity cryptocurrencies, the Ethereum price spike, and the epic hack of Bybit all exposed the problems of high leverage, weak risk control, and over-reliance on narratives. Between February and April, the crypto market gradually cooled from its frenzy, with macroeconomic tariff policies resonating with traditional risk assets, prompting investors to re-evaluate the weight of security, liquidity, and fundamental value in asset pricing.

Ethereum's performance during this phase is particularly representative: ETH was under pressure relative to Bitcoin, but this weakness did not stem from technological or infrastructure degradation. On the contrary, in the first half of 2025, Ethereum continued to advance on key roadmaps such as gas caps, Blob capacity, node stability, and zkEVM and PeerDAS, steadily improving its infrastructure capabilities. However, the market did not price in these long-term advancements accordingly.

As we entered the middle of the year, structural repairs and institutionalization proceeded simultaneously. The Ethereum Pectra upgrade and the Bitcoin 2025 conference provided support for both technology and narrative, while the Circle IPO marked the deep integration of stablecoins and compliant finance. The formal implementation of the GENIUS Act in July became the most symbolic turning point of the year—the crypto industry received clear and systematic legislative support in the United States for the first time. Against this backdrop, Bitcoin hit a new annual high. At the same time, on-chain derivatives platforms such as Hyperliquid experienced rapid growth, and new forms such as stock tokenization and Equity Perps began to enter the market's view.

In the second half of the year, capital flows and narratives showed a clear divergence. Accelerated ETF approvals, expectations of pension fund entry, and the start of an interest rate cut cycle jointly boosted the valuations of mainstream assets, while celebrity coins, memes, and highly leveraged structures frequently experienced clearing out. The large-scale liquidation event in October became a concentrated manifestation of the year's risk release; at the same time, the privacy sector showed a phased strength, and new narratives such as AI payments and Perp DEX quietly took shape in some sectors.

The year-end saw the market conclude amidst a high-level decline and low liquidity. Bitcoin fell below $90,000, while traditional safe-haven assets like gold and silver performed strongly, demonstrating the deep integration of the crypto market into the global asset allocation system. At this juncture, mainstream crypto assets have entered a period of bottoming out. Whether the market will follow the traditional four-year cycle of rebound followed by a bear market decline in 2026, or break the cycle and reach new highs driven by continued institutional inflows and a more robust compliance framework, will be the most crucial research question for the next phase of market trends.

Macroeconomic Environment and Policy: Structural Changes in 2025

1. Shift in policy direction: The year 2025 is fundamentally different from previous cycles.

Looking back at the various cycles of the crypto industry, policy and regulation have always been important exogenous variables influencing market expectations, but their mode of operation underwent a fundamental change in 2025. Unlike the laissez-faire growth in 2017, the lenient approach in 2021, and the comprehensive suppression from 2022 to 2024, 2025 presents an institutional shift from suppression to permission, and from ambiguity to standardization.

In past cycles, regulation has primarily intervened in the market in a negative manner: either disrupting risk appetite at market peaks through bans, investigations, or enforcement, or releasing uncertainty in a concentrated manner through accountability during bear markets. Under this model, policies often fail to effectively protect investors or provide long-term development prospects for the industry, instead exacerbating the drastic fluctuations of the cycle. However, entering 2025, this governance approach began to undergo structural changes: executive orders took precedence, regulatory agencies adopted more consistent stances, and legislative frameworks were gradually advanced, gradually replacing the previous regulatory model that relied mainly on case-by-case enforcement.

Crypto regulations development chart (source: Messari)

In this process, the advancement of ETFs and stablecoin legislation played a crucial role in "anchoring expectations." The approval of spot ETFs enabled crypto assets such as Bitcoin and Ethereum to gain a compliant channel for long-term capital allocation through the traditional financial system for the first time. By the end of 2025, the scale of ETP/ETF products related to Bitcoin and Ethereum had reached hundreds of billions of dollars, becoming the main vehicle for institutionalized capital allocation of crypto assets. At the same time, stablecoin-related legislation (such as the GENIUS Act) clarified the stratification of crypto assets at the institutional level: which have "financial infrastructure attributes" and which are still high-risk speculative products. This classification broke the general pricing of "crypto as a whole" and promoted the market to begin to differentiate the valuation of different assets and sectors.

It's important to note that the policy environment of 2025 did not create a "policy dividend-driven boom" like in previous cycles. Instead, its more significant meaning lies in providing the market with a relatively clear lower limit: defining the boundaries of permissible behavior and distinguishing between assets with long-term viability and those destined for marginalization. Within this framework, the policy role shifts from "driving market trends" to "constraining risks," and from "creating volatility" to "stabilizing expectations." From this perspective, the policy shift in 2025 is not a direct engine of a bull market, but rather an institutional foundation.

2. Funds First: A "Low-Risk Channel" Built with Stablecoins, RWA, ETFs, and DAT

In the 2025 crypto market, a counterintuitive yet crucial phenomenon gradually became clear: funds didn't disappear, but prices didn't respond. Stablecoin market capitalization and on-chain transaction volume remained high, and spot ETFs maintained net inflows across multiple time windows. Meanwhile, with the exception of a few mainstream assets, most Altcoin experienced prolonged price pressure. This divergence between capital activity and price performance forms the core entry point for understanding the market structure of 2025.

Stablecoins played a completely different role in this process compared to previous cycles. In the past, stablecoins were largely seen as "intermediary currencies" within exchanges or as leverage fuel in bull markets, their growth often highly correlated with speculative activities. However, in 2025, stablecoins gradually evolved into tools for fund placement and settlement. The total market capitalization of stablecoins grew from approximately $200 billion at the beginning of the year to over $300 billion by the end, an increase of nearly $100 billion for the year, while the overall market capitalization of altcoins did not expand in tandem. Simultaneously, the annual on-chain settlement volume of stablecoins reached trillions of dollars, even exceeding the annual transaction volume of traditional card organizations in nominal terms. Therefore, the growth of stablecoins in 2025 primarily stemmed from payment, clearing, and fund management needs, rather than speculative leverage.

The development of RWA further reinforces this trend. In 2025, the RWAs that were truly implemented were mainly concentrated in low-risk assets such as government bonds, money market fund shares, and short-duration notes. Their core significance lies not in creating new price elasticity, but in verifying the feasibility of compliant assets existing on-chain. On-chain data shows that the TVL (TVL) of RWA-related protocols began to accelerate in 2024 and continued to rise in 2025—as of October 2025, the TVL of RWA protocols had reached nearly $18 billion, several times higher than at the beginning of 2024.

While this amount is still insufficient to directly drive crypto asset prices at the macro level, its structural impact is quite clear: RWA provides on-chain funds with a near-risk-free return option, allowing some funds to "remain on-chain but not participate in crypto price fluctuations." Given that interest rates remain attractive and regulatory boundaries are becoming clearer, this option marginally weakens the traditional positive correlation between on-chain activity and token prices, further explaining the structural characteristic of "increased funding but decreased price elasticity" in 2025.

The impact of ETFs is more evident in the stratification of funds than in a comprehensive diffusion. Spot ETFs provide a compliant, low-friction allocation channel for mainstream crypto assets such as Bitcoin and Ethereum, but this fund entry path is highly selective. In terms of actual scale, as of early 2026, leading BTC/ETH spot ETFs held nearly 6%/4% of the total circulating supply of these cryptocurrencies, forming a clear institutional fund absorption at the mainstream asset level. However, this increase has not spilled over to a wider range of asset classes. During the ETF rollout, the BTC Dominance (the ratio of Bitcoin's market capitalization to the total cryptocurrency market capitalization) did not experience the rapid decline common in historical bull markets, but instead remained at a high level, reflecting that institutional funds did not spread to long-tail assets (typically referring to tokens ranked outside the top 100 by market capitalization). As a result, while ETFs strengthened the fund absorption capacity of top assets, they objectively exacerbated the structural differentiation within the market.

Equally noteworthy as ETFs is the phenomenon of "crypto-equity companies" (DATs) that rapidly emerged in 2025. These companies include digital assets such as BTC, ETH, and even SOL on their balance sheets, and use capital market tools like share issuance, convertible bond issuance, buybacks, and pledging proceeds to shape their stocks into "financing and leveraged cryptocurrency exposure vehicles." In terms of scale, nearly 200 companies have disclosed adopting similar DAT strategies, holding a total of over $130 billion in digital assets. DATs have evolved from isolated cases into a traceable capital market structure. The structural significance of DATs lies in the fact that, like ETFs, they strengthen the attraction of funds to mainstream assets, but the transmission mechanism is more "equity-based"—funds enter the stock valuation and financing cycle rather than directly into the secondary liquidity of long-tail tokens, thus further exacerbating the stratification of funds between mainstream and altcoin assets.

In summary, the incremental funds in 2025 were not absent, but rather systematically flowed into channels that were "compliant, low-volatility, and could be held for a long time."

3. Market Outcomes: Structural Stratification of Mainstream Assets and Alternative Markets

In terms of final price results, the crypto market in 2025 presented a highly counterintuitive yet logically consistent situation: the market did not collapse, but the vast majority of projects were in a continuous decline. According to Memento Research's statistics on 118 token issuances in 2025, approximately 85% of the tokens were priced lower than their TGE price on the secondary market, with a median FDV drawdown exceeding 70%, and this performance did not significantly improve during the subsequent market recovery phase.

Token issuance in 2025 (source: MEMENTO RESEARCH)

This phenomenon is not limited to smaller-cap projects, but covers most small- and mid-cap assets. Even some projects with high initial valuations and significant market attention have significantly underperformed Bitcoin and Ethereum. It's worth noting that even when weighted by FDV, the overall performance is still significantly negative, meaning that larger projects with higher initial valuations are actually having a greater drag on the market. This result clearly indicates that the problem in 2025 is not "disappearing demand," but rather the targeted migration of demand.

With the policy and regulatory environment gradually becoming clearer, the funding structure of the crypto market is changing, but this change is not yet enough to completely replace the short-term dominant role of narrative and sentiment in prices. Compared to previous cycles, long-term capital and institutional funds are beginning to more selectively enter assets and channels with compliance attributes and deep liquidity, such as mainstream coins, ETFs, stablecoins, and some low-risk RWAs. However, these funds are more of a "bottom-level receiver" rather than a short-term price engine.

Meanwhile, the market's main trading activities remain driven by high-frequency funds and sentiment, and the token supply continues to follow the old cycle's issuance logic, expanding under the assumption of a "broad-based bull market." As a result, the systemic "alt market boom" that the market expected has failed to materialize. New narratives can still receive short-term price feedback driven by sentiment, but lack the funds to support them across volatility cycles. Price declines often outpace the realization of the narrative, resulting in a clear phased and structural mismatch between supply and demand.

It is within this dual structure that a new market state emerged in 2025: at the long-term level, allocation logic began to concentrate on mainstream cryptocurrencies and assets with institutional support capabilities; while at the short-term level, the crypto market remained a transactional market driven by narrative and sentiment. Narratives were not ineffective, but their scope of influence was significantly compressed—they were more suitable for capturing emotional fluctuations than for bearing long-term valuations.

Therefore, 2025 is not the end of narrative pricing, but rather the starting point where narratives begin to be filtered by capital structures: prices will still react to emotions and stories, but only those assets that can attract long-term capital after the volatility will achieve true value accumulation. In this sense, 2025 is more like a "transitional period of pricing power" than the end game.

Industry and Narrative: Key Directions Under Structured Layering

1. Tokens with real returns: Sectors that are the first to adapt to changes in funding structures.

1.1 2025 Review: Income Assets Become the Target of Funds

In a context where narratives still dominate short-term prices, but long-term capital is beginning to set entry barriers, tokens with genuine returns have been the first to adapt to the changing capital structure. The relative resilience of this sector in 2025 was not due to more attractive narratives, but rather because it provided a path for capital to participate that didn't rely on sustained upward sentiment—even if prices stagnated, holding the tokens still offered a clear return logic. This change was first reflected in the market acceptance of yield-generating stablecoins. USDe, for example, gained rapid capital recognition not through complex narratives, but through a clear and explainable yield structure. In 2025, USDe's market capitalization once exceeded $10 billion, becoming the third largest stablecoin after USDT and USDC, with its growth rate and scale significantly outpacing most risk assets during the same period. This result indicates that some capital has begun to view stablecoins as cash management tools rather than transaction intermediaries, and in the context of a high-interest-rate environment and increasingly clear regulatory boundaries, they have begun to remain on-chain in the form of stablecoins for extended periods. Their pricing logic has also shifted from "whether it has narrative flexibility" to "whether the returns are genuine and sustainable." This does not mean that the crypto market has fully entered the cash flow pricing stage, but it clearly illustrates that when the narrative space is compressed, funds will prioritize asset forms that can stand without needing a story.

1.2 2026 Outlook: Funds will further concentrate on core value assets

When the market enters a phase of rapid decline or liquidity contraction, the so-called "worthy of attention" assets are not essentially judged by their narrative, but rather by their two resilience capabilities: first, whether the protocol layer can genuinely continue to generate fees/revenue in a low-risk-appetite environment; and second, whether these revenues can provide "weak support" for the token through buybacks, burns, fee switching, staking rewards, etc. Therefore, assets with "more direct value capture mechanisms," such as BNB, SKY, HYPE, PUMP, ASTER, and RAY, are often more likely to be prioritized for recovery during periods of panic. Assets with "clear functional positioning but greater divergence in value capture strength and stability," such as ENA, PENDLE, ONDO, and VIRTUAL, are more suitable for structural screening during the post-decline sentiment recovery phase: those that can convert functional usage into continuous revenue and verifiable token support are qualified to advance from "trading narrative" to "configurable target."

DePIN represents a long-term extension of the logic of real-world returns. Unlike yield-generating stablecoins and mature DeFi, the core of DePIN lies not in its financial structure, but in its ability to transform highly capital-intensive or inefficient infrastructure needs in the real world into a sustainable distributed supply network through tokenization incentives. By 2025, the market had already completed its initial screening: projects unable to demonstrate cost advantages or heavily reliant on subsidies quickly lost investor patience; while DePIN projects that could connect with real needs (computing power, storage, communication, AI inference, etc.) began to be seen as potential "income-generating infrastructure." At the current stage, DePIN is more like a direction closely watched by investors against the backdrop of accelerating AI demand, but not yet fully priced in. Whether it can enter the mainstream pricing range in 2026 depends on whether real demand can be transformed into scalable and sustainable on-chain revenue.

Overall, the reason why tokens with genuine returns were the first sector to be retained is not because they have entered a mature value investing stage, but because in an environment where narratives are filtered by funding structures and the altcoin season is absent, they were the first to meet a very real condition: giving funds a reason to stay without relying on continuous price increases. This also determines that the key issue for this sector in 2026 will no longer be "whether there is a narrative," but rather "whether the returns will still be valid after scaling."

2. AI and Robotics × Crypto: Key Variables in Productivity Transformation

2.1 2025 Review: The AI ​​and Robotics Narrative Cools Down

If there was any sector that "failed" in terms of price in 2025 but became more important in the long run, then AI and Robotics × Crypto is undoubtedly the most typical example. Over the past year, the investment fervor surrounding DeAI in both primary and secondary markets has cooled significantly compared to 2024, with related tokens generally underperforming mainstream assets and their narrative premium being rapidly compressed. However, this cooling down is not due to the failure of the direction itself, but rather because the productivity revolution brought about by AI is more reflected in the systemic improvement of production efficiency, and its pricing logic has become temporarily misaligned with the pricing mechanism of the crypto market.

Between 2024 and 2025, the AI ​​industry underwent a series of structural changes: the demand for inference rose rapidly compared to the demand for training; the importance of post-training and data quality increased significantly; competition among open-source models intensified; and the agent economy began to move from concept to practical application. These changes collectively point to one fact—AI is moving from a "model capability race" to a systems engineering phase focused on "computing power, data, collaboration, and settlement efficiency." These are precisely the areas where blockchain may play a role in the long term: decentralized computing power and data markets, composable incentive mechanisms, and native value settlement and access control.

2.2 Outlook for 2026: Productivity Revolution Remains Key to Unlocking the Upper Limits of Narrative

Looking ahead to 2026, the significance of AI × Crypto is shifting. It's no longer a short-term narrative of "AI projects issuing tokens," but rather a means of providing supplementary infrastructure and coordination tools for the AI ​​industry. The same applies to Robotics × Crypto; its true value lies not in the robots themselves, but in how to automate the management of identity, permissions, incentives, and settlement within multi-agent systems. As AI agents and robotic systems gradually acquire autonomous execution and collaborative capabilities, friction in traditional centralized systems regarding permission allocation and cross-agent settlement begins to emerge, and on-chain mechanisms offer a potential solution.

However, this sector failed to achieve systematic pricing in 2025, precisely because the realization of its productivity value was too long. Unlike DeFi or trading protocols, the business loop of AI and Robotics has not yet been fully formed. While real demand is growing, it is difficult to translate into scalable and predictable on-chain revenue in the short term. Therefore, in the current market structure where "narratives are compressed and funds prefer assets that can be absorbed," AI × Crypto is more like a direction that is being continuously tracked but has not yet entered the mainstream allocation range.

AI and Robotics × Crypto should be understood as a layered narrative: in the long term, DeAI represents a potential infrastructure for productivity transformation; in the short to medium term, protocol-level innovations, exemplified by x402, may be the first to become a highly resilient narrative repeatedly validated by sentiment and capital. The core value of this sector lies not in whether it is immediately priced in, but in the fact that once it enters a pricing range, the upper limit it can unlock is significantly higher than that of traditional application-based narratives.

3. Prediction Markets and Perp DEX: Speculative Demand Reshaped by Institutions and Technology

3.1 2025 Review: Speculative Demand Remains Stable

Against the backdrop of compressed narratives and cautious long-term funding, prediction markets and decentralized perpetual contracts (Perp DEX) emerged as one of the few sectors to achieve counter-trend growth in 2025. The reason is not complicated: they address the most native and resilient needs in the crypto market—the pricing of uncertainty and the demand for leveraged trading. Unlike most application narratives, these products do not "create new demand" but rather migrate existing demand.

The essence of prediction markets is information aggregation. Funds "vote" for future events through betting, and prices gradually approach collective consensus through continuous adjustments. Structurally, this is a naturally existing and relatively more compliant "casino model": there are no house-manipulators controlling the odds, the outcome is determined by real-world events, and the platform profits solely from transaction fees. This sector first made its high-profile debut during the US presidential election. Prediction markets surrounding the election results rapidly amassed liquidity and public attention on-chain, elevating them from fringe DeFi products to a narrative with real-world impact. In 2025, this narrative did not recede but continued to ferment with the improvement of infrastructure maturity and the expectation of multiple protocols issuing tokens. From a data perspective, prediction markets were no longer a niche experiment in 2025. The cumulative trading volume of prediction markets exceeded $2.4 billion, while the total open interest remained at approximately $270 million, indicating that this was not short-term speculative activity but rather genuine funds continuously bearing the risk of event outcomes.

The rise of Perp DEX points more directly to the core product form of the crypto industry—contract trading. Its significance lies not in whether "on-chain is faster than off-chain," but in introducing the opaque, high-counter-risk contract market into a verifiable, liquidable, and trustless environment. Transparent positions, liquidation rules, and liquidity pool structures give Perp DEX security attributes distinct from centralized exchanges. However, it must be acknowledged that in 2025, the vast majority of contract trading volume will still be concentrated on centralized exchanges (CEXs). This is not a matter of trust, but rather a result of efficiency and user experience issues.

3.2 Outlook for 2026: Institutional and technological factors determine whether it can become a cross-cycle product.

Looking ahead to 2026, Polymarket and Parcl are partnering to launch a real estate prediction market, which has the potential to reach a wider non-crypto user base and become a mainstream application. Furthermore, the World Cup, a global event inherently driven by speculation, is highly likely to become the next inflection point for prediction markets. More importantly, the maturity of the infrastructure is crucial: continued improvement in liquidity depth, including market-making mechanisms, cross-event fund reuse capabilities, and the price tolerance for large orders; and the refinement of outcome adjudication and dispute resolution mechanisms. These two factors will determine whether prediction markets can evolve from "event-based betting products" into a probabilistic pricing infrastructure capable of withstanding macroeconomic, political, financial, and social uncertainties in the long term. If these conditions mature, the upper limit of prediction markets will not be limited to short-term traffic, but rather whether they can become one of the few core applications in the crypto ecosystem with cross-cycle viability.

The key to Perp DEX's continued expansion lies not in its "decentralization," but in its ability to provide incremental value on the demand side that centralized platforms cannot currently offer. For example, further improving capital utilization efficiency: by deeply integrating unused contract margins with DeFi protocols, allowing them to participate in lending, market making, or yield strategies without significantly increasing liquidation risk, thereby improving overall capital utilization. If Perp DEX can further unlock such structural innovations while maintaining security and transparency, its competitiveness will no longer be merely "safer," but "more efficient."

From a broader perspective, prediction markets and Perp DEXs share a common thread: they don't rely on long-term narrative premiums, but rather on repeatable and scalable speculative and trading demand. In an environment where narratives are filtered and the "copycat season" is absent, these sectors are more likely to attract sustained attention. They may not be the first choice for long-term allocation funds, but they are highly likely to become the core stage where sentiment funds, trading funds, and technological innovation repeatedly converge in 2026.

Summarize

Looking at the big picture, 2025 was not a "failed bull market," but rather a profound reshaping of the crypto market's pricing power, participant structure, and value sources. On the policy front, regulatory logic gradually shifted from a highly uncertain and suppressive state to a clear definition of boundaries and functions. On the funding front, long-term capital did not directly flow back into high-volatility assets, but instead established compliant, auditable, and low-volatility channels through structural tools such as ETFs, DAT, stablecoins, and low-risk RWAs. On the market front, the price mechanism underwent substantial changes; narrative diffusion no longer automatically triggered linear upward feedback, the broad-based altcoin boom gradually failed, and structural differentiation became the norm.

However, this doesn't mean that narratives themselves have disappeared from the market. On the contrary, in shorter timescales and more localized sectors, narratives and emotions remain the most important drivers of trading. The repeated activity in prediction markets, Perp DEX, AI payments, and memes indicates that the crypto market remains a highly speculative, decentralized arena for information and risk. The difference lies in the fact that these narratives are increasingly difficult to solidify into a long-term valuation basis; they are more like phased opportunities that are constantly filtered, rapidly verified, and quickly cleared out by funding structures based on real-world use cases, trading needs, or risk expressions.

Therefore, entering 2026, a more realistic and workable framework is taking shape: at the long-term level, the market will continue to concentrate on mainstream assets and infrastructure with real utility, distribution capabilities, and institutional support; at the short-term level, narratives are still worth participating in, but no longer worth believing in. For investors, the key is no longer betting on the arrival of the "next full-blown bull market," but rather pragmatically judging which assets and sectors can survive in an environment of market contraction, regulatory constraints, and intensified competition, and also gain flexibility and pricing power when sentiment recovers and risk appetite is released in stages.

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